Annex 14
Letter, 30 June 2000, from Sport England
to the Football Association
ENGLISH NATIONAL STADIUM
Thank you for the meeting on Tuesday afternoon
to discuss the issues related to a payment of £20 million
in connection with the Wembley project. As you know, I have written
to Adam Crozier on a number of occasions seeking clarification
on the agreement reached between the Secretary of State and the
Football Association.
I am writing to confirm the main points arising
from our discussions, and to seek your views as to the best way
forward.
TIMETABLE
First, the key timetable points appear to be:
— We need to reach a final agreement
within the timeframe envisaged for concluding the financing arrangements
for the project, which we understand is within the next week or
two (please see below).
— The Secretary of State (in his letter
to Ken Bates of 7 January 2000) envisaged that a payment would
be phased over five years from December 2000 with best endeavours
by the FA to achieve quicker repayment if possible. This is clearly
important in respect of the potential cash flows associated with
the Lee Valley Athletics project.
However, it is clear from our discussions that
there is still lack of clarity as to the basis of the arrangements:
— The Secretary of State's letter to
Ken Bates suggested that the FA had offered a £20 million
payment "if the requirements to stage athletics were removed".
As you appreciate, there may be particular difficulties in changing
the fundamental purpose of the project (ie. a stadium for three
sports) without exposing the applicants to a possible full repayment
of grant or the Council to judicial review. In any event, we had
understood in our continuing negotiations with Chase and WNSL
that this was not, in fact, an issue, and that there was no call
for athletics to be removed from the project (particularly as
it is already part of the design).
— Clearly any change at this stage
may be very difficult in terms of process, and, at best, is likely
to lead to significant timing implications.
— You also mentioned that the agreement
with the Secretary of State, despite its absence from his letter,
included the potential for changes to the Lottery Funding agreement
to enable the FA/WNSL to generate additional funds to make up
the shortfall resulting from a payment of £20 million to
us. You had in mind a relaxation, for example, of the prohibitions
on naming rights or anchor tenants. These are not matters which
have been raised with us in this context.
— As we discussed, changes to these
issues at this stage would have a significant bearing on the current
discussions with Chase Manhattan in relation to the financing
agreements. For example the sale of naming rights and the installation
of an anchor tenant are among the key elements to be held in reserve
in case of financial difficulties in the construction or post
construction period.
— In addition we discussed the sale
of naming rights should this be released to you now in return
for the £20 million payment. If, for example, they could
be sold for more than £20 million the Council would no doubt
expect the local sale cost to be returned up to £120 million
on the basis that there could be less financial need for our grant
to the project if this condition was removed.
— For these reasons, and the fact that
these are important factors in establishing the terms of the LFA,
I do not think that the Council (who would have to review the
project in this context) would be prepared lightly to accept this
proposal.
— The Secretary of State's letter suggests
that the payment would be made by the FA. You indicated that there
were significant problems which may prevent the FA from making
a payment of £20 million, in terms of financial and legal
ability. You therefore expected that any payment would have to
come from WNSL and not the FA even if WNSL provided the £20
million to be paid through the FA. You also indicated that the
agreement with the Secretary of State had not been, as yet, considered
or approved by either the Executive Board of the Council of the
FA, although there is a meeting on 7 July where it could be discussed.
— With regard to WNSL, you doubted
whether there was the potential for the financing proposals to
include an additional £20 million, on the grounds of viability.
You suggested that the potential was reduced still further by
the additional costs to the project associated with the Planning
Agreements as required by the London Borough of Brent.
— I would therefore be grateful if
you could clarify whether the payment is to be made by WNSL or
the FA, and on what basis.
Finally, based upon our discussions yesterday,
the options for structuring the payment appear to be limited,
ranging from what effectively amounts to a voluntary payment from
either WNSL or the FA, through to a renegotiation of particular
terms of the Lottery Funding Agreement.
Clearly, the timetable is very tight, and we
must move forward to seek a resolution to the issues as soon as
possible.
I would therefore welcome your response to the
points raised in this letter, and your further proposals. I suggest
that we arrange to meet again very soon.
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